It isn’t hard to see the attraction of playing the National Lottery. Who doesn’t dream of winning a million or two? So don’t let me stop you.
The problem is that you will almost certainly NOT hit the jackpot. Sorry to break it to you, although I suspect you already knew.
According to the National Lottery website, the odds of winning the Lotto jackpot are one in 45,057,474. You have even less chance of winning the EuroMillions jackpot, with pitiful odds of just one in 139,838,160.
You might fancy those odds, but I don’t. However, I’d still like to make a million one day. Not because I want to go on lavish cruises, or buy a yacht, or spray cash around. I have humble tastes. I just want the freedom to be able to stop working at some point, and financial independence to enjoy my final years, and support those I love.
Shares can make you a million
I’m taking the best way I know of getting there, by investing in stocks and shares.
I don’t need a clever strategy or natural investment genius. Nor do you. All you have to do is regularly invest money in, say, top FTSE 100 stocks, then leave it there to grow over the years.
The sooner you start doing this, the better, because that way your money will have much longer to roll up in value.
It’s a mistake to think that you can take the fast-track to building a million portfolio by using your exceptional stock picking skills. Investors who do that, in the hope of picking up tomorrow’s Fevertree or JD Sports Fashion (both 10-baggers) at an early stage, soon come unstuck. You just cannot rely on making the right calls, again and again.
Spread your money around
Instead, spread your risk by building a balanced portfolio of different stocks, ideally paying dividends.
Dividend income is your secret weapon when trying to build a £1m portfolio, provided you automatically reinvest your payouts back into your portfolio for growth. That way your regular payments will pick up more stock or fund units, turbo-charging the compounding effect.
With a balanced spread of stocks and low-cost index trackers, you don’t have to worry about the type of market turbulence we are seeing today. In fact, if you invest a regular sum every month, you can turn a crash to your advantage. With global stocks down more than 10% this year, a regular monthly payment will pick up more stock or fund units, which will be worth more when markets finally recover.
Leave your money to grow, for as long as you can, while topping up your portfolio as often as you can afford to do so.
This may not offer the overnight thrill of your numbers coming up on the Lottery, but the odds of success are far greater, and don’t depend on sheer dumb luck.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.